7 ways to save your Income Tax legally in India

Every time when the financial year comes to an end we have hiccups saving tax on our salaries and the different investments that we have made in the entire year. The thing is that many of us know about the investment liable for tax concessions, but we still tend to ignore them. Parizad Sirwalla of India today lists few simple steps to save tax. Under 80C/80CCC/80CCD, the investments and expenditures, subjected to a limit of Rs 1 lakh per financial year are tax exempted and are as follows.

The Tuition Fees paid by your child or two children for a full-time educational course in any Indian University, College, School, is eligible for a tax-exemption. This tuition fees does not include any kind of personal tuitions or donation of any kind.

In a property transaction, the Stamp Duty and Registration Charges paid for a home earns a tax-free tag under Section 80C.

Monthly installments paid for a Home Loan, which includes principal as well as interest amounts is liable for tax-exemption under Section 80C, provided the loan is taken from a prescribed lender i.e. banks, PSU etc.

Under section 80C, Life Insurance Premiums paid for self, spouse and child, is liable for deduction, unless the premium is paid on time and is not a late payment. If the premium is more than 20 percent of the sum assured, then it is not a tax-exempted amount. One can claim a tax deduction only up to 20 percent. For example, if one has assured a sum of Rs 4, 00,000, then the premium to be paid is Rs 85,000. Under this clause of section 80C, one can claim a tax-exemption maximum for the amount of Rs 80,000.

Another saving scheme, Public Provident Fund (PPF) comes under this section of tax saving. It offers an interest rate of 8 percent annually and Rs 500 to Rs 70,000 can be invested per year, which has been increased to Rs 1 lakh from December 2011. The compulsory period of maturity is 15 years. The entire matured amount from a PPF is liable for tax-exemption. The only drawback is that it takes 15 long years for this process. For example, Rs 70,000 per year in a PPF would yield a sum of Rs 20.5 lakh at the end of 15 years, which is a huge amount but tax-free. Thus PPF is not only a good saving scheme, but also an excellent tax saving method.

Under Section 80C of the Income Tax Act 1961, Fixed Deposits with a scheduled bank for a time period of 5 years is eligible for an exemption for tax, but the interest for a FD is entirely liable for tax. It is to be noted that the tax saving FDs made are not liable for a pre-mature withdrawal.

Indian citizens of 60 years or 0f 55 years who have opted for a voluntary retirement scheme are eligible to avail the Senior Citizen Savings Scheme (SCSS). This scheme offers an interest rate of 9 percent a year. The principle amount gained is tax-free but the interest gained is completely taxable.

These are some of the investments which are completely or partially tax-free. Some other saving schemes are Post office five-year time deposit (POTD) scheme, Unit-linked insurance plans (Ulip), Mutual fund (MF) and Equity-linked savings scheme (ELSS).

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